City-backed Target expansion proceeding in Brooklyn Park

  • Article by: JIM ADAMS , Star Tribune
  • Updated: April 23, 2013 - 1:12 PM

To encourage expansion and new jobs at Target’s campus, Brooklyn Park is providing about $5 million in tax help. Some protest that few area residents will be hired, but the city says there will also be indirect economic benefits.

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Target Corp. is adding twin 9-story office towers to the six buildings and parking ramps at its Northern Campus north of Hwy. 610 in Brooklyn Park. The city is providing property tax rebates in return for at least 1,500 jobs. A development specialist says such city incentives to gain big companies are common.

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To gain the high-paying jobs that cities compete for, Brooklyn Park will rebate about $5 million in property taxes to Target Corp. for twin office towers rising on its campus just north of Hwy. 610.

In return, Target has agreed to provide at least 1,500 jobs under an agreement first reached in 2006, said Jason Aarsvold, the city’s community development director. However, the retailer has declined to commit to hiring local residents at the campus, northeast of the interchange of Hwys. 610 and 169.

“We are committed to hiring the right people with the right skills at the right time,” Target spokeswoman Molly Snyder said last week.

Target began building the north campus in 1999 and agreed in 2006 to add three more buildings and 1,500 employees by January 2011. But because of the recession, the company erected only one office building that added about 900 workers, so its tax abatement has been reduced, Aarsvold said.

Under a revised agreement, the company began building the two nine-floor towers last year. By the time they are completed in late 2014, Target plans to transfer up to 3,000 more employees, mostly doing information technology jobs, from its downtown Minneapolis headquarters. Total capacity will be about 6,000 jobs, Snyder said. The Target Northern Campus now has about 3,000 people working in six buildings, she said.

“Target is a great prospect, a very appealing economic development,” said Tony Schertler, a development consultant and executive at Springsted Inc. of St. Paul. It is not unusual for cities to offer millions in subsidies for such large corporate developments, Schertler said. In return, the cities gain jobs, spinoff business and increased property taxes.

But some community groups have criticized the Target deal because few residents will be hired. Leaders of the Northwest Community Collaborative, a coalition of local groups, said Target won’t agree to hire or train city residents, about half of whom are ethnic minorities, to work in its new buildings.

“When we start handing over millions of dollars in corporate subsidies, that overlooks strengthening the foundational needs the city has,” including good jobs and affordable housing, said Joy Stephens, a collaborative member.

Asked about Stephens’ concerns, Snyder replied in an e-mail that “Target remains committed to being a good neighbor in all the communities where we do business. We place a high value on creating a diverse work environment and focus on hiring qualified applicants who match the skill sets needed for particular positions.”

Target was asked in 2006 about hiring city residents, but declined because of additional costs and because it wanted flexibility in staffing, Aarsvold said.

Mayor Jeff Lunde and Snyder say Target has lived up to its agreement, which counts transferred workers as new jobs in Brooklyn Park. And since the jobs are being transferred, there are no openings for which residents can be trained, Lunde said.

He said most of the agreement’s benefits are indirect, such as good references to other big companies from Target, a Fortune 500 company, that could help city recruitment efforts. Lunde noted that the nearly 4,000 new workers are likely to attract new restaurants and other businesses, and some workers are expected to buy homes near the campus.

Target broke ground last June on a $32.5 million, nine-floor office tower on its north campus. Work began last fall on a similar-sized, 325,000-square-foot tower. When done, the twin towers are each estimated to generate about $1 million a year in property taxes for the city, schools, county and other taxing jurisdictions, Aarsvold said.

In return for the jobs and other benefits, the city agreed to forgive up to 90 percent of its portion of the taxes that Target will pay over 20 years on the office building erected in 2006 and on one of the new towers, Aarsvold said.

Under the revised agreement, the city agreed to rebate $2.5 million (the present value of total taxes to be paid over 20 years) up front on one tower, which means Target will pay full taxes on that tower. The $2.5 million came from excess tax increment financing (TIF) revenues, as permitted under a new state law the city and others sought, Aarsvold said.

The 90 percent abatement means Target will receive roughly $250,000 a year on one tower once job goals are met, Aarsvold said. He said the largest tax abatement Target received so far was $180,000 in 2008, but that was gradually reduced to $40,000 by 2011 as job targets were missed.

He said Target also promised to build a 20-acre city park as the 350-acre campus develops in the next decade or so, and to consider selling some land for affordable and market-rate housing. He said the incoming 4,000 workers in the three newest buildings will add 15 percent more well-paid jobs to the city’s workforce.

Bloomington’s experience

Larry Lee, community development director for Bloomington, has worked since the 1980s on business developments, including the Mall of America that opened in 1993 on the vacant Metropolitan Stadium site.

Tax abatement and TIF are typical business development tools, Lee said, but his city has had no typical deals on the few projects done since the 2008 recession. He said Bloomington assists developers and companies whose projects meet city goals, such as reusing blighted land or building high density office projects or housing.

The city offers subsidies, sometimes by selling bonds, to build parking ramps, enlarge sewers or widen roads to handle high-density developments, he said. The bonds are usually repaid from property taxes generated by the new project.

Lee said that Bloomington assisted on the just-opened $135 million Radisson Blu. The 500-room hotel, expected to create about 240 jobs, connects by skyway to the Mall of America. A city agency sold $40 million in bonds for the hotel and used $15 million in TIF revenues to build an adjoining three-level public parking garage.

Smart cities don’t give money directly to a business, but instead use city funds to build infrastructure to support desired projects that create jobs, Lee said. City aid “goes into pavement, pipes and bricks and mortar that will stay in the community even if the business folds or moves away,” he said.

Aarsvold noted that attracting high-rise corporate offices with good-paying jobs has long been a top priority for Brooklyn Park. The Target agreement shows the city can attract such premier development, he said.

“We had to deal with Target to get the level of development we wanted to see,” he said. “This is something to build on for development on the Hwy. 610 corridor. Having Target will set the tone.”

 

Jim Adams • 612-673-7658

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